Pending home sales in the United States experienced a notable decline last month, ultimately reaching the lowest point recorded since 2001, as reported by the National Association of Realtors this Thursday. This leading indicator for home sales, which is derived from contract signings, witnessed a decrease of 5.5% month-over-month in July, bringing the index level down to 70.2.
Analysts had anticipated a 0.2% increase in the NAR's pending home sales index, as indicated by a Bloomberg survey, highlighting a significant deviation from expectations. When examining the year-over-year performance, pending transactions dropped by 8.5%, significantly surpassing the consensus forecast of a 2% decline.
All four major regions tracked by the NAR reported month-to-month contractions, with the Midwest reporting the steepest drop at 7.8%, closely followed by a 6.5% decline in the South. However, the Northeast stood out as the only region to see growth on an annual basis, marking a 2.4% increase. NAR Chief Economist Lawrence Yun commented on the current market conditions, stating, "A sales recovery did not occur in midsummer." He pointed out that while job growth and an increase in available inventory generally provide a positive influence, these factors were insufficient to mitigate ongoing affordability issues and a degree of hesitation related to the forthcoming US presidential election.
Yun noted that the situation is indeed challenging for buyers, particularly as they navigate the complexities of the current economic landscape. Furthermore, he mentioned, "Falling mortgage rates will no doubt bring buyers into the market." As of Thursday, the average 30-year fixed mortgage rate had declined to 6.35%, based on data provided by Freddie Mac.
This drop in mortgage rates reflects growing expectations that the Federal Reserve will consider cutting interest rates during its next meeting, according to insights from Freddie Mac Chief Economist Sam Khater. Khater also cautioned that despite this optimistic outlook, "a rebound in purchase activity remains elusive until we see further declines in rates." Earlier this month, the NAR disclosed that existing home sales in the US had increased by 1.3% last month, aided by a decrease in unsold inventory.
Concurrently, new-home sales demonstrated a robust increase of 11% in July, while national home prices continued to rise, as per data released by the Census Bureau and the Department of Housing and Urban Development. These contrasting trends highlight the volatility and complexity of the current housing market, underscoring the factors that will continue to influence buyer behavior moving forward..